Karl Marx had it partially right. Controlling the means of production is important, for sure, but there’s also something to be said for controlling the means of distribution.
The Walt Disney Company has long produced movies, a successful and profitable endeavor. These days, a lot of people watch those movies on Netflix, which makes its money off of subscription fees from those watchers. Netflix in recent years has moved into the world of production, with compelling original programming, and now Disney is going to get into streaming, announcing plans on Tuesday to pull its content from Netflix as it prepares to launch its own streaming service.
To do this, Disney is ramping up its ownership stake in BAM Tech, spun off last year from Major League Baseball Advanced Media, moving from a 33 percent share to a majority stake in a $1.58 billion deal. Part of the plan includes launching an ESPN-branded streaming service next year.
The interesting thing here is that there already is an ESPN streaming service, WatchESPN, that already features thousands of sporting events each year. So, what’s the big deal here? Let’s check the Disney release.
“The ESPN-branded multi-sport service will offer a robust array of sports programming, featuring approximately 10,000 live regional, national, and international games and events a year, including Major League Baseball, National Hockey League, Major League Soccer, Grand Slam tennis, and college sports. Individual sport packages will also be available for purchase, including MLB.TV, NHL.TV and MLS Live.
“The new service will be accessed through an enhanced version of the current ESPN app. In addition to the multi-sport service, the ESPN app will include the news, highlights, and scores that fans enjoy today. Consumers who are pay TV subscribers will also be able to access the ESPN television networks in the same app on an authenticated basis. For many sports fans, this app will become the premier digital destination for all their sports content.”
The play that this got in the media was that the NHL will be back on ESPN, very exciting for fans who miss the classic ESPN hockey theme song, long for Barry Melrose’s mullet on their screens, and just generally want to see hockey get the boost in the public eye that comes from being televised on America’s top sports network.
Not so fast. NBC is the NHL’s national television partner through 2021, and it was just a few months ago that ESPN cut ties with some of the top talent in hockey journalism, with Pierre LeBrun and Scott Burnside as part of the network’s massive spring bloodletting.
The reason that it’s possible to say “ESPN will have hockey again” is because of the “available for purchase” NHL.TV package, which allows fans to pay to stream out-of-market games. As with MLB.TV, some games can be broken out as free, and voila, there will be live hockey on an ESPN service, produced by somebody other than ESPN.
Producing live sports coverage is expensive and difficult. What Disney is finding here is a workaround, with the ability to absorb league-owned streaming platforms, and make money for itself by selling subscriptions to the packages, with free samples handed out at their discretion. Meanwhile, ESPN continues producing its own content, but that remains accessible only if customers are paying cable subscribers.
It’s a much better business plan than spending millions of dollars per season on rights feels, then hoping to make it all back in cable carriage fees and advertising revenues. Instead, Disney spends nothing on rights, nothing on production, and can simply sit back and rake in the profits from fans who are interested specifically in the product for which they control the means of distribution.
The backlash to this is years down the road, when various TV rights packages come up and the networks doing the broadcasts wonder what they’re paying for when ESPN gets to so heartily enjoy the fruits of their labor. That, however, is not ESPN’s concern. It’s a matter for the teams and leagues selling their television rights, and it is they who must determine what to do with production now that Disney is seizing the means of distribution and bringing a new revolution to sports television.